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Military officials and analysts are concerned that South Korea’s communist neighbor may conduct a second nuclear test this month, which would sharply damage Seoul's desperate campaign to win much-needed foreign currency liquidity.
Partly due to the news of the North's missile launch, Seoul's main share index fell 5.8 percent to close at a more than 26-month low and the local won currency plunged almost 5 percent to a near 10-year low against the U.S. dollar on Thursday.
North Korea fired two short-range missiles off its west coast on Tuesday afternoon, two days ahead of marking the second anniversary of the country's first-ever nuclear weapons test, South Korean officials said.
The rockets appeared to be KN-02 or Styx missiles, they said. Local media said they are air-to-ship missiles, a weapon the North rarely tests. The missile launch was the first since March when a North Korean naval vessel fired three short-range Styx missiles into the Yellow Sea.
South Korean officials said the missile test seems part of the North's routine military exercises, since it had designated an off-limit zone for vessels in the Yellow Sea before it fired the missiles.
But they also expressed concerns that the missile test could worsen the international standoff over the North's nuclear weapons programs and raise military tensions on the Korean peninsula, which could boost Seoul’s geopolitical risks, hurting consumer and investor sentiment.
Chairman of the Joint Chiefs of Staff Kim Tae-young said he believes North Korea is developing a small, lightweight nuclear warhead that can be carried by its missiles.
"I understand that North Korea is working to develop a small nuclear warhead that can be loaded into a missile," Kim told an annual parliamentary audit on Wednesday. It is still unclear whether the North has already manufactured such a nuclear warhead, he said.
Some analysts warn that the North could launch a second nuclear test or a ballistic missile that could be equipped with a nuclear warhead around Oct. 10, when it marks the founding anniversary of the communist Workers' Party.
The North has a history of conducting missile and nuclear tests on the nation's festive days to praise its autocratic leader Kim Jong Il's "brilliant" leadership and call for national unity and public loyalty to the reclusive leader.
On the eve of the Party's birthday two years ago, the North carried out an underground explosion of a nuclear device, claiming "the successful and safe nuclear test in our country was a historic incident in its 5,000-year-long history and in world politics.”
In 1998, the North test-fired a Taepodong-1 missile with a range of up to 2,500 kilometers over Japan into the Pacific Ocean, days before the country celebrated the founding anniversary of the communist regime. The North also launched a set of missiles in 2006 including a Taepodong-2 missile, which is believed to have a range of up to 6,700 kilometers.
Analysts said this week, which marks three festive days – the anniversary of the nuclear test on Oct. 9, the founding of the ruling party on Oct. 10 and the inauguration of Kim Jong Il as the party's general secretary on Oct. 8 – would be "critical" for the North's nuclear disarmament process.
According to intelligence sources here, the North has recently increased activities near nuclear and missile test sites in an apparent move to repair the sites for further test launches. The signs include smoke seen rising from the nuclear site at Punggye-ri, probably from workers burning clothing and equipment used for the restoration work.
The North is also believed to be repairing its missile test site at Musudan-ri on the northeast coast where its long-range ballistic missiles were fired. In June, it tested a rocket engine that can be used for a long-range ballistic missile at another missile base in Dongchang-ri on the country's west coast.
The moves come after the North kicked out nuclear inspectors and removed IAEA seals and cameras from the Yongbyon nuclear plant last month, in an angry response to Washington's failure to take Pyongyang off its list of terror-sponsoring nations.
Earlier, Pyongyang halted disablement of its nuclear facilities and began restoring its plutonium-producing Yongbyon reactor, which had been shut down a year ago under an aid-for-disarmament deal.
"North Korea's next steps would be the reopening of its plutonium reprocessing plant, another nuclear test and launch of ballistic missiles," said conservative lawmaker Song Young-sun, a former defense analyst.
Michael J. Green, a senior advisor at the Center for Strategic and International Studies in Washington who predicted the North's 2006 nuclear test, said he believes the North is preparing for a second nuclear test.
"It is a matter of time for North Korea to conduct a second nuclear test," Michael Green, McCain’s top advisor on Asia policy, told Seoul's largest newspaper, Chosun Ilbo.
